The Financial System Is Moving to Bitcoin | David Marcus

0:12David Marcus and Peter McCormack. actually go to Bitcoin, is actually by leveraging the ability to offer an account that's both dollars and Bitcoin. Then gradually, you'll use more and more Bitcoin. It's a cost center that's in the billions of dollars, and now you can flip that and make it a profit center net margin of billions of dollars, and also not be captive to a bunch of other networks that are leeching on your data. And so the incentive is massive for these platforms to do this. We think this will win. Thank you. I just saw, well, I was actually doing an interview when you made your announcement, but I caught it on the live stream afterwards.

1:06It's pretty big. This is, I think this is a real game changer for Bitcoin in some ways. But I want to start from the start with you. Why did you decide to sort of focus your entire career on payments? I think that, first of all, great to be back. Thank you. I think that the reason I've been so maniacally obsessed with money movement and payments is because it's just not right. And it feels utterly broken. And it feels that many people have tried to fix the way that money moves around the world. And everyone has failed, including myself previously. And so I developed this kind of obsession with figuring out a way to make money move on the internet like any other type of content.

2:00And that's it. It's been my focus. So when you say you failed before, I imagine you're talking about Libra and PayPal. Well, PayPal clearly is not a failure in terms of the company. But what do you mean by you failed? I feel like, I mean, look, if you were to actually stop someone, we're in Vegas, like if you're stopping someone on the Strip right now and they're from another country and you wanted to send them money, it wouldn't be an easy thing. You would see a Brazilian person and they would be like, okay, I can give you my PixKey and you wouldn't know what to do with it. Or you could find a european and they would give you an iban and you wouldn't know what to do with it uh if you're here in america um i deal with this personally on the business side because i live in australia and uh the sponsors i think all the sponsors have a base in the u.s and so i obviously will invoice them with an option to pay in bitcoin but they don't always take that option and i we you can make it work with international routing and all that sort of stuff but i get crushed on sort of fees and exchange rates.

3:07It's not an easy... And it takes days. And so, and, you know, many people who are working in the space are like, oh, but you can just pay everyone and anyone with a stable coin. It works fine, right? And the reality is most people you would meet today, some of them would say, yeah, fine, just send me a stable coin to my wallet. But most people won't, right? And they wouldn't even know what a stable coin is. And so the question is, how do you actually use all of the technologies that are available today to move value on the Internet to deliver money where people want it? And that's what we did today.

3:44I think, you know, with this announcement of Grid Global Accounts, we've basically put together and stitched together all of the work that we've been focused on obsessively over the last four years to move money around the world on a platform that enables you to input and output. any kind of money, whether it's a fiat currency on a banking system, Bitcoin, of course, or a stablecoin, and just make it work for people and businesses. So for anyone that didn't catch the announcement, what is GridGlobal Accounts? So let's take a step back, right? So today, when you think about all of the different types of content we have on the internet, ads.

4:26You have images, you have text messages, you have emails, you have all of these things. And there's an app for every single one of those. Like if I need to send you a photo, there's like 15 different ways I can send you a photo. And I don't even need to ask you if I have your phone number, I can just send it. It'll work. There's just no such thing for money. And today, if you're a platform, if you look at where the money originates and where people and businesses earn money, they earn money in a variety of different ways, but increasingly so they get paid by platforms. And you can be a host on Airbnb, you can be a driver on Uber, you can be a creator on Instagram or TikTok or YouTube, and you get paid by those platforms.

5:19and this becomes kind of your financial nexus, right? And the way that those platforms today move money around is you accumulate a bunch of money, you have to wait until you get to a certain threshold for most people, and then you get paid much later, not that the time you earn that money. And when you get paid, the platform loses and you kind of lose too because the platform basically pays you to your bank account. And so the interest on that yield doesn't accrue to you or to the platform and goes back to the bank. The bank typically provides a pretty average service and everyone loses. And so we wanted to go to the core of that problem and figure it out.

6:03And so what we built, and this couldn't have happened even a year ago, because you have to have a perfect alignment of stars to actually do this, which we now have, is basically a global dollar account product that lives on Spark. And Spark is our Bitcoin L2 that supports stablecoins natively and moves stablecoins virtually for free. And so it's an account that you can have that's branded to your platform. And your users, your stakeholders can use that, get paid in dollars, and we'll soon add many other currencies to make it a multi-currency account. And then the minute you got money from one of these platforms or you fund it yourself, you can spend it in more ways than any account before its time.

6:52So the first thing is we announced this morning a partnership with Visa to become a Visa principal member, which is not a small deal. And that will allow us to issue great global accounts-based cards in 100 countries. So you receive money in this account. It's a new kind of embedded wallet, so you can log in with Google, with Apple, with the passkey. You don't need to worry about losing your seed phrase or your private key. That's a thing of the past. And so it's a self-custodial Spark-based grid global account. You have dollars. Now you can get a debit card and spend it at 175 million Visa merchants globally.

7:34And when you spend that, can you spend in dollars in Bitcoin? Yes. Anything that has a balance in your account, whether it's Bitcoin or dollars or any other currency, you can pull from any of these to actually use your debit card. But that's not it. That's not enough. The other thing we did is we also made those accounts compatible with LightSpark Grid, which is the product that we've been building for years, connecting into domestic payment systems in 65 countries. So to take the example I gave you earlier, if you're a Brazilian here, you can give your PIX key to someone who has one of these accounts and that person can pay you in real time in your Brazilian bank account in Brazilian reais.

8:16And that's true in 65 countries. So now you have a balance. You can move that balance to your local bank account in your local country, in your local currency. You can pay anyone in the world instantly in real time. And then, because we didn't think it was enough, we also added cross-chain support. So if you want to pay someone using USDT on Tron or USDC on Solana, you can do that too, because we wanted to make sure that a dollar in a great global account can be a dollar anywhere. And so if you combine all of these capabilities, it's really truly the most powerful global dollar account. and it so happens to live on top of Bitcoin via Spark.

8:55And so it makes it an address that's both Bitcoin enabled with real Bitcoin, not wrapped Bitcoin, and dollars. And you can buy and sell Bitcoin, of course. And then the last part of it is that we feel that agents are going to change the way that interfaces are built and that you're not going to interact with apps and websites as much. And so we made it agent ready, which means that I can actually delegate my accounts to an agent that can now do all of those things on my behalf. And I have one running on my phone. I can show you later if you want. Yeah, definitely. And I'll be able to just say, hey, you know, text, get your contact details, your bank details, and it'll settle in real time, right?

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12:35Swan have helped over 100 ,000 clients since 2020. And if you're serious about acquiring and securing Bitcoin, I recommend Swan. meet the team at swan.com forward slash wbd which is swan.com forward slash wbd i mean there's so much there that i want to ask you about but let's start with you said this wasn't possible a year ago stars had to align what had to happen to allow you to do this so it's really four things um the first thing is the regulation so if you want any of these big platforms those global platforms to be able to launch these things. They have to do it from a place of certainty, from a regulatory standpoint.

13:15And we didn't have that. And now we do. We have the Genius Act in the US. We have MICA in Europe. We have similar legislation almost everywhere. So now you can actually launch your own stablecoin or use stablecoins and not worry about that. So it basically made stablecoin real money. I've got a question on that, actually, because like you say, these were really stablecoin tokenization bills that passed rather than anything to do with Bitcoin. Do you think Bitcoin's out of the woods in terms of regulatory clarity as well? Yeah, I do think so. And we can talk about that after, but I had this whole

13:59schizophrenic relationship with stablecoins until it clicked that actually stablecoins was the best thing ever for Bitcoin adoption. And we can go down that rabbit hole in a bit. But anyways, so now stable coins can be used. So that's part one. And I think Bitcoin regulation is clear as well. Part two is embedded wallets, like really good embedded wallets. And we've seen that like, you know, companies, whether it's like, you know, Turnkey or Privy, they've done a really, really amazing job at making those accounts those wallets actually usable by anyone without fearing losing your funds which i think is like a massive step which is absolutely a prerequisite yeah um the third step was we needed a network on top of in this case on top of bitcoin that could support stable coins natively which spark does really really well and now has massive reach like you know it's in the feather wallet it's in wdk it's in like all of the bitcoin wallets you use now now.

15:04And that's really, really also a prerequisite. And then the fourth aspect is really the rise of stablecoin backed debit cards, which the networks and the banks have now been leaning on a lot more, which again, wasn't possible before. So if you combine all of these capabilities, plus the work that we've done over the last four years connecting to 65 countries, domestic real-time payment systems and you bring it all together in a product, that's great global accounts. So this is not an actual app that people are going to download from the app store, right? This is like the infrastructure, the plumbing behind the scenes.

15:43Is that right? So it's basically, it's not an app because, I mean, I have an app, but that's, you know, it's a wallet that's called Bread that's built on top of this thing. That's like, you know, the first wallet that will hit the app store, I think this week. And that team did a really good job at like building a best in class dual pockets dollar bitcoin wallet and then they were kind enough to share the source code with us so we can add agent delegation and all these things and play with that in a real product rather than a prototype and um and so you you will experience this in an app or on a website um but it we're not consumer facing so we're like we could have done it, by the way.

16:27And I said this on stage earlier because I'm tempted. It's such a good product. So I'm really tempted to launch it myself. And it's like, hey, the world needs an account like this. You would use it. Everyone would use it. And so it's really tempting. But I feel really passionate about this idea of building the best network for money. And if you want to do that, then you need to empower the platforms that have the reach to actually go and build on their own. And so that's the route we've chosen. So obviously you've experienced at PayPal and then at Facebook with Libra. And we talked about why you think you maybe failed there.

17:08This is obviously a better solution, but PayPal has a huge network effect. How do you beat them? Well, I mean, PayPal's network is closed. Yes. But everyone knows of PayPal. Everyone has probably interacted with it at some point. They've got a big user base. How do you catch them? I think you just have to build a better product. And I think I have to give a lot of kudos to the block people building Cash App and building Square because they have their own proprietary product, but they're making it ultra open. Yeah, right. It's like the bread app that I was telling you about or Tether wallet can now, if you have one of these, you'll be able to go to a square coffee shop and tap to pay.

17:55It's wild when you think about it, right? It's a totally open network because it lives on top of Bitcoin. And we think this will win because ultimately when you build on open standards like the internet, like, you know, AOL or CompuServe didn't win because it was closed. And so the problem and why it didn't happen yet is because those products that were open were far worse than the closed products. Yeah. And they don't have to be anymore. And, you know, Grid Global Accounts is a great example of that. It's much better than any dollar account you can ever have. like you could ever have until now.

18:31And so now you can have the best product. And it turns out it's built on an open network that enables all builders to actually add value to the overall value that the network provides to every endpoint on it. So it's just great time. The really cool thing about this is I've been waiting for a Bitcoin-friendly bank to try and offer me a product like this where I could have my Australian dollar account, maybe a US dollar account, and a Bitcoin account in there. But this has gone, you've completely circumvented the banks and just built it, which is awesome. Tell me how it works a little bit. Because if I choose to pay in Bitcoin and I take my Visa card in and I tap to pay, what's happening behind the scenes there?

19:12Are you doing a swap for like Bitcoin, stablecoin, and then paying the merchant? Yeah, so basically, I mean, the merchant piece is completely outside of our view, right? It's like Visa is now building merchant settlements for debit card and credit card payments. and stable coins, but that's on their side, the acquirer. What we do on our side is deliver the dollar, so to speak, at the issuer, like as an issuer. And then like whatever the arrangement is between the merchant and the acquirer, that's like their business. So if they are receiving money in their local currency, that's what's going to happen.

19:50And so the merchant always gets paid in whatever currency they want. And the way that it works is basically that you have this wallet that you authorize a card to pull from with limits that you can set. And then whenever you make a payment, it can pull from either your Bitcoin balance or your dollar balance or your other currencies soon. And when you say this product's sort of entirely built on Bitcoin, can you just walk through what you mean by that? It's all built on Spark. So basically, a grid global account is a Spark wallet. And it comes with a bunch of bells and whistles on top of just being a Spark wallet, which is like the debit card rails, the integration with the grid capabilities to move money around locally and globally on traditional payment networks.

20:36works. That's the difference, right? And so what it needs from having just a Spark wallet is the ability for people to, if they want to interact with a debit card or with traditional payment rails, they can KYB or KYC, depending if they're a business or a person. And from that point on, it unlocks instantly the ability to move money, not only just within Spark and cross-chain and on Lightning and on Bitcoin L1, but also across all of the traditional payment networks and Visa. Okay. I want to dig into something you mentioned just briefly a little earlier. You were talking about this kind of gig economy that's cropped up where people are getting paid from YouTube's, TikToks.

21:18And one of the issues you said in there was that the platform aren't collecting interest that you're not, this money's kind of in limbo. Is interest something that you'll be able to do at some point so the way that this works is and the way we recommend it to platforms is they can issue their own stable coins and and i i'll expand on why this is actually possible because that's also a thing right we used to be in a world where if you don't have enough liquidity or network effects actually doing your own stable coin was a bad idea because you couldn't use it anywhere yeah um and so then it's like you know useless yeah uh and because we've made the account fungible and and compatible with all of the other stable coins and all of the other wallets and all of the other chains it doesn't matter now because if you're receiving like your own coin your own stablecoin in, you know, I don't know, Nigeria, and you want to pay someone who has a Tron wallet and is using USDT, you can do that.

22:26So the liquidity problem we've basically erased by making those balances fungible and enabling bridges and other atomic swap platforms to actually exist on top of Spark. So what we advise platforms is launch your own stablecoin. We'll help you do that. And you'll earn interest because it's yours. And then in the US, there's a lot of debate whether you can actually pay interest to holders or not. But outside of the US, that's not a problem in many countries. So you can do that if you want. Because in the Genius Act, they said no interest on stable coins, right? I mean, that's more the clarity. The Clarity Act, sorry.

23:02Yeah. Too many. But yeah, so in the US, it'll be more difficult to do that. But internationally, you can definitely do that. And typically, of course, this is a much more powerful account than a normal bank account for payments in the US. So we expect a lot of US people and businesses to use it just for the purpose of sending and receiving money. But typically, if a platform is paying someone in the US, and it's a US-based platform, that's where they have the least friction. Where they have the most friction is actually sending money internationally. And for those, they can actually distribute yield if that's what they want to do.

23:43And if they want to keep it, they can keep it. That's their choice and let the market play out. But at least they keep it versus I'm pushing it to, I don't know, a Spanish bank and then it's black hole for me, the platform and for my user. More than black hole from a revenue standpoint, one of the things that no one talks about is the fact that if you're connecting and if you're basically a tenant of someone else's network and you're pushing to all of the banks at the edges, you also share all of the data, all of your data. And the data was maybe kind of a cost of doing business, sharing all of the data that will enable those businesses to actually build businesses off the back of the work that you've done to spin up that platform and generate product market fit and economic impact.

24:33But in the age of AI, it's like negligence to let everyone leech on your data and build products. And, you know, if you do that, then you control your own data and you control your own economics. And it's a, you know, it changes the game completely. So you're not collecting data on any of this? No, because it's a self-custodial wallet. That's awesome. Yeah. Like in the stack of Bitcoin wallets that I use, I have like my spending wallet, my Lightning wallet, which I might have up to$1 ,000 or something in it. And then - Which one do you use? What's your favorite? I tend to use Phoenix the most.

25:07Okay. I like Phoenix. And then on top of that, then I really go to proper cold storage Bitcoin. And again, even levels in that. And I think really the way people have looked at Bitcoin Wallet so far is that your Lightning Wallet should only have a little bit of money in. You don't want to maybe put tens of thousands of dollars in a Lightning Wallet that's on your phone. Like where does this fit? Like how big do you think accounts should or could be on this? It doesn't matter. So like this is the beauty with Spark. And we spent so much time doing that, right? It's like if you opened a Tether wallet, which they've done a really good job.

25:40It's like so clean and so easy to use. And you have USDT on a variety of different chains. And you have Bitcoin on L1, on Lightning, and on Spark. And all of the Bitcoin piece is on Spark, basically. It's running on Spark. And it doesn't matter. It's like, it doesn't matter where you hold it as a user. It's just taken care of for you. So you'd never have to actually open channels and park liquidity and do all of these things. It'll just work. And I think ultimately that was something that was needed for a mass market adoption because like, you know, mass market is not going to think about where should I keep stuff and how should I keep it.

26:20They're never going to be balancing channels. So you have a fad balance in an account that's actually safe, and you cannot lose the seed phrase or any of that. And you just use it for everyday purchases and payments. I want to dig into that a bit more. When you say it's actually safe, how is it secured? So today, there are two different models, but if you look at the way Turnkey does it, so they basically split the secrets and i think three parts and trusted execution environments basically so you know secure enclaves and and the beauty is basically that you can use a traditional more traditional login which means that it's mass market so you can use google to log in or you can use a passkey which i would recommend yeah and so then you have a passkey that's securely stored either on your device in a secure element, and then the secrets that are in three different parts that can only be reassembled when you log in with a passkey, which is super secure and easy.

27:23And to the extent that you don't put your passkey in a hardware key that you lose, then you're fine. And most people will actually just use like a password manager and like use a passkey that they store in their password manager or log in with Google or with Apple or with their phone number. The nice thing with this is that the platforms themselves can offer their own login that you're already using for the platform and extend the capabilities of your account. Let's say that YouTube were to do that. I'm riffing. You could have a YouTube money account. And basically your Google account that you use to publish your videos on YouTube becomes like your login to your YouTube money account or Google money account.

28:08And you would receive that money and you would have a debit card and you can move that money in real time to your bank account in Australia 24-7, even on a Sunday at 2am, if that's what you need, or move it to a stablecoin on any chain and you would totally use that, right? Yeah. I think it's really exciting. And one of the things I love about this, alongside the stuff that Cash App and Square have been doing and Strike have been pushing this, is that it feels like we're moving into the era where Bitcoin is actually going to be used as money properly. Yes. Because for so long, the narrative has been store of value, but Bitcoin was always destined to be money as well.

28:42Yes. Do you think this is the starting point? Yes. And actually, now let me close the full loop of the stablecoin stuff. I think the interesting thing with the stablecoin piece, it's actually a pretty profound realization that I had. And I was with Miles Sutter earlier from Cash App, and I gave him credit for that. because when they announced that Cash App was actually going to do USDC on Solana, I'm like, what in the world? What? Like, you're the most Bitcoin forward company. What are you doing? And I was in the middle of my own like schizophrenic journey with stable coins. And then I'm like, no, wait a minute.